(Rewrites throughout with quotes and context)
By David Ingram
WASHINGTON, Jan 15 (Reuters) - A judge on Wednesday upheld subsidies at the heart of President Barack Obama's healthcare overhaul, rejecting one of the main legal challenges to the policy by conservatives opposed to an expansion of the federal government.
A ruling in favor of a lawsuit brought by individuals and businesses in Texas, Kansas, Missouri, Tennessee, West Virginia and Virginia would have crippled the implementation of the law by making health insurance unaffordable for many people.
In his ruling, U.S. District Judge Paul Friedman in Washington D.C. wrote that Congress clearly intended to make the subsidies available nationwide under the 2010 Patient Protection and Affordable Care Act.
"There is evidence throughout the statute of Congress's desire to ensure broad access to affordable health coverage," the judge wrote.
In 2012 the U.S. Supreme Court upheld a requirement of the law, commonly called Obamacare, that most Americans buy health insurance or pay a tax penalty.
The subsidies, in the form of tax credits, are available to people with annual incomes of up to 400 percent of the federal poverty level, or $94,200 for a family of four.
The lawsuit by conservative legal groups asserted that the wording of the 2010 law allowed subsidies to help people obtain insurance only in exchanges established by states, not those set up by the federal government.
Michael Carvin, a lawyer for those who brought the suit, filed a notice that he would appeal the ruling.
"This decision guts the choice made by a majority of the states to stay out of the exchange program," Sam Kazman, another lawyer for the plaintiffs, said in a statement.
The law aims to provide health coverage to millions of uninsured or under-insured Americans by offering private insurance at federally subsidized rates through new online health insurance marketplaces in all 50 states and in Washington, D.C.
Only 14 states opted to create and operate their own exchanges, leaving the Obama administration to operate a federal marketplace for the remaining 36 states that can be accessed through the HealthCare.gov website.
A spokeswoman for the Justice Department, which is defending the law, said officials were pleased with the decision.
Ron Pollack, executive director of Families USA, a nonprofit group that supports Obamacare, said the ruling was vital to the health insurance overhaul.
"This (case) had been the most significant existential threat to the Affordable Care Act," he said.
The law is considered Obama's signature domestic policy achievement. His administration's flawed rollout of the HealthCare.gov website in October drew sharp criticism from both opponents and supporters of the law.
Republican lawmakers and conservatives strongly opposed the law, saying it represented an overreach by the federal government.
The case is Halbig v. Sebelius, U.S. District Court for the District of Columbia, No. 1:13-cv-623. (Editing by Grant McCool)